ECB USA, Inc. et al v. Chubb Insurance Company of New Jersey

Filing 140

ORDER Overruling 121 Appeal/Objection of Magistrate Judge Order to District Court. Signed by Judge Robert N. Scola, Jr on 9/7/2021. See attached document for full details. (cds)

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United States District Court
for the
Southern District of Florida
ECB USA, Inc. and others,
Plaintiffs,
v.
Chubb Insurance Company of New
Jersey and Executive Risk
Indemnity, Inc., Defendants.

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Civil Action No. 20-20569-Civ-Scola
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Order
This matter is before the Court upon the Defendants/Counter Plaintiffs’
objection to United States Magistrate Judge Edwin G. Torres’s order (ECF
No. 118) denying the Defendants’ motion to strike seven of the Plaintiffs’
affirmative defenses (ECF No. 103). For the reasons stated below, the Court
overrules the Defendants’ objections. (ECF No. 121.)
1. Background
On February 7, 2020, this matter was removed from state to federal court.
(ECF No. 1.) Just under one week later, the Plaintiffs filed the first of four
amended complaints. (ECF No. 5.) Relevant here, on February 27, 2020, the
Plaintiffs filed the Second Amended Complaint (“SAC”), to which the Defendant
Chubb Insurance Company of New Jersey (“Chubb”) filed an answer on March 5,
2020. (ECF Nos. 10, 11.) The SAC contained an allegation that “Chubb issued
the Policy under which [Constantin Associates, LLP] was a named insured.” (ECF
No. 10 at ¶ 31.) In its answer, Chubb admitted this allegation. (ECF No. 11 at
¶ 31.) Almost a month later, Chubb amended its answer and denied this
allegation. (ECF No. 16 at ¶ 31.) Following additional amendments, the operative
pleadings are now the Plaintiffs’ Fourth Amended Complaint (ECF No. 79), the
Defendants’ Answer and Affirmative Defenses to Fourth Amended Complaint and
Counterclaim (ECF No. 93), and the Plaintiffs’ Answer and Affirmative Defenses
to Counterclaim (ECF No. 95.)
The Plaintiffs’ answer includes twenty-five affirmative defenses (ECF
No. 95), of which the Defendants sought to strike seven in a Motion to Strike
filed on April 29, 2021 (ECF No. 103). Following full briefing (ECF Nos. 103, 107,
111), the Magistrate Judge denied the motion, finding that the affirmative
defenses contained enough “legal sufficiency” to withstand a motion to strike.
(ECF No. 118 at 7–8, 14–15.)

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2. Legal Standard
As an initial matter, the Court will review the Magistrate Judge’s Order de
novo. Courts routinely review reports concerning motions to strike affirmative
defenses de novo, see, e.g., Klohr v. Mid-Continent Excess and Surplus Ins. Co.,
No. 9:18-CV-80761, 2019 WL 1118235, at *1 (S.D. Fla. Jan. 4, 2019), and the
Plaintiffs do not contest the appropriate standard of review.
A court may strike any “insufficient defense or any immaterial,
impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). “The striking of an
affirmative defense is a drastic remedy generally disfavored by courts.” Katz v.
Chevaldina, No. 12-22211-CIV, 2013 WL 2147156, at *2 (S.D. Fla. May 15,
2013) (King, J.). An affirmative defense will be stricken where it consists of only
“bare bones, conclusory allegations,” see Merrill Lynch Bus. Fin. Servs., Inc. v.
Performance Machine Sys. U.S.A., Inc., No. 04-60861, 2005 WL 975773, at *11
(S.D. Fla. Mar. 4, 2005), or where it is insufficient as either “patently frivolous”
or “clearly invalid as a matter of law,” Katz, 2013 WL 2147156, at *1.
3. Discussion
Upon a de novo review of the Magistrate Judge’s Order, the parties’
briefing, and the relevant legal authorities, the Court concludes that Judge
Torres’s Order was well-reasoned and correct. The Court will briefly address the
Defendants’ arguments.
A. Party Presentation
The Defendants first point to the “principle of party presentation,” arguing
that the Magistrate Judge improperly deviated from the parties’ arguments and
relied on theories and issues not raised by the parties. (ECF No. 121 at 4–5.)
However, while courts are generally bound to the arguments raised by the
parties, that does not restrict a court’s authority to “identify and apply the
proper construction of governing law.” Kamen v. Kemper Fin. Servs., Inc., 500
U.S. 90, 99 (1991); U.S. Nat’l Bank of Or. v. Indep. Ins. Agents of Am., Inc., 508
U.S. 439, 447 (1993) (“[A] court may consider an issue antecedent to . . . and
ultimately dispositive of the dispute before it, even an issue the parties fail to
identify and brief.”) (cleaned up). In any event, the examples that the Defendants
point to are either harmless or immaterial. (See ECF No. 121 at 10, 12–13.)
Therefore, the Court overrules the Defendants’ objections to the Order to the
extent that those objections are based on “party presentation.”

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B. Legal Nullity
The Defendants argue that the challenged affirmative defenses should be
stricken to the extent that those affirmative defenses are based on a “legally null”
admission. (ECF No. 121 at 6–8.) The Defendants rely on the principle that an
amended pleading renders a former pleading a “legal nullity” that is “no longer a
part of [the party’s] averments against his adversaries.” Hoefling v. City of Miami,
811 F.3d 1271, 1277 (11th Cir. 2016) (cleaned up). While that is true in terms of
identifying the operative pleadings, that rule does not decide the question of the
evidentiary value of an admission made in a prior pleading. The Eleventh Circuit
has decided that question, holding that a “pleading in the same action which
[has] been superseded by amendment, withdrawn or dismissed, [is] admissible
as admissions of the pleading party to the facts alleged therein.” Tucker v.
Housing Auth. of Birmingham Dist., 229 F. App’x 820, 826 (11th Cir. 2007).
The cases that the Defendants cite do not lead to a different conclusion.
The court in Mittenthal held that a former pleading, no matter how contradictory
to an amended pleading, cannot be used when evaluating jurisdiction; rather,
the operative pleading controls. See Mittenthal v. Fla. Panthers Hockey Club, Ltd.,
472 F. Supp. 3d 1211, 1219–20 (S.D. Fla. 2020) (Altman, J.). This holding was
based on a stalwart principle of federal courts that jurisdiction “depends on the
state of things at the time of the action brought.” Id. at 1220 (quoting Mollan v.
Torrance, 9 Wheat. 537, 539 (1824)). The court’s references to whether sinceamended admissions have evidentiary value were dicta. See Mittenthal, 472 F.
Supp. 3d at 1221. The other cases cited by the Defendants similarly do not
discuss the evidentiary purposes of a since-amended admission, but only state
the general rule that an amended pleading is the operative pleading. See Fresh
Results, LLC v. ASK Holland, B.V., No. 17-cv-60949, 2020 WL 95039, at *1 n.1
(S.D. Fla. Jan. 8, 2020) (Bloom, J.) (holding that for purposes of dismissal,
amended pleadings contain the operative allegations); Stone Tech. (HK) Co., Ltd.
v. GlobalGeeks, Inc., No. 20-cv-23251, 2021 WL 86776, at *4 (S.D. Fla. Jan. 11,
2021) (Bloom, J.) (holding that failure to reallege a previously asserted
counterclaim resulted in the abandonment of the counterclaim); Venkataram v.
Bureau of Prisons, No. 16-24502-Civ-Scola, 2018 WL 1273078, at *2 (S.D. Fla.
Mar. 12, 2018) (Scola, J.) (holding that the failure to include a claim in an
amended complaint prevents that claim from proceeding).
The Defendants also complain that the Magistrate Judge misconstrued
their counterclaim when Judge Torres, citing to paragraphs 107 and 117 of the
counterclaim, stated that the Defendants acknowledged that Constantin
Associates was covered under the policy at issue. (ECF No. 121 at 8–10.) The
Defendants misunderstand the appropriate standard on a motion to strike; the

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Magistrate Judge did not hold that its reading of the counterclaim was the
appropriate reading. Rather, the Magistrate Judge held that the Defendants’
counterclaim provides additional alleged support for the affirmative defenses at
issue. See Cano v. S. Fla. Donuts, Inc., No. 09-81248-CIV, 2010 WL 326052, at *1
(S.D. Fla. Jan. 21, 2010) (Ryskamp, J.) (“[A party] must allege some additional
facts supporting the affirmative defense.”). The Magistrate Judge explicitly did
not inquire into the merits of the affirmative defenses—whether Constantin
Associates was in fact covered by the policy is not at issue in this motion. (ECF
No. 118 at 6–7). All that matters is that the Plaintiffs pled sufficient facts and
that the affirmative defenses are legally sufficient. See Smith v. Wal-Mart Stores,
Inc., No. 1:11-cv-226-MP-GRJ, 2012 WL 2377840, at *2 (N.D. Fla. June 25,
2012) (“[I]n ruling upon a motion to strike it is not appropriate for the Court to
consider the merits of any affirmative defense because the Court accepts all wellpled facts as true and only evaluates the legal sufficiency of affirmative
defenses.”).
C. Coverage Letter
The Defendants contend that the Plaintiffs’ twenty-fifth affirmative defense
should be stricken, as coverage cannot be created by waiver if the party was not
insured under a policy in the first instance. (ECF No. 121 at 10–11.) But as the
Magistrate Judge held, courts do not resolve the merits of an affirmative defense
on a motion to strike; rather, courts only look to legal sufficiency of an
affirmative defense. (ECF No. 118 at 16–17); see Smith, 2012 WL 2377840, at *2.
An affirmative defense is insufficient if “(1) on the face of the pleadings, it is
patently frivolous, or (2) it is clearly invalid as a matter of law.” Marley v.
Jetshares Only, LLC, No. 10-23178-CIV, 2011 WL 2607095, at *2 (S.D. Fla. June
30, 2011) (O’Sullivan, Mag. J.). And an affirmative defense is “sufficient” if it
“puts into issue relevant and substantial legal and factual questions” and there
is “no showing of prejudice to the movant.” See Reyher v. Trans World Airlines,
Inc., 881 F. Supp. 574, 576 (M.D. Fla. Apr. 3, 1995).
As the Magistrate Judge correctly held, the Defendants failed to establish
that the twenty-fifth affirmative defense is legally insufficient. Unsurprisingly,
the Plaintiffs contest that Constantin Associates was not insured under the
policy at issue, and there is a separate factual dispute concerning whether
Constantin Associates paid a premium for coverage under the policy. (ECF
No. 118 at 14–16); (ECF No. 79 at ¶¶ 78, 114, 176, 185, 193, 197.) Therefore,
the Plaintiffs have established factual disputes. While the Defendants contend
that the twenty-fifth affirmative defense is invalid as a matter of law, holding so
would require determining whether Constantin Associates is in fact covered by

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the policy at issue or not. This is not appropriate in a motion to strike. See
Smith, 2012 WL 2377840, at *2.
Therefore, as there are factual disputes and, as the Magistrate Judge
found, there is no prejudice to the Defendants, the Court overrules this
objection.
For the reasons above, the Court overrules the Defendants’ objections to
Judge Torres’s order on the Plaintiff’s motion to strike. (ECF No. 121.)
Done and ordered, in Miami, Florida on September 7, 2021.

Robert N. Scola, Jr.
United States District Judge